Real estate investment trust (“REIT”) Rayonier Inc. RYN is expected to report second-quarter 2015 results on Aug 5, after the market closes.
The company posted 100% positive earnings surprise in the preceding quarter, with an average beat of 16.13% in the trailing four quarters.
Let’s see how things have shaped up for this announcement.
Factors to Consider This Quarter
For Pacific Northwest Timber segment, pro-forma operating income declined in 2014, and this trend continued in first-quarter 2015 also. For 2014, pro-forma operating income came in at $31.4 million; while for 2015, Rayonier expects the same within $13–$18 million. Operating income from the Real Estate segment came in at $47.5 million for 2014; and for 2015, it is expected in a range of $25–$35 million.
The company anticipates weaker second-quarter results, primarily due to lower sales volumes in the Pacific Northwest Timber segment as well as Real Estate segment. For the Pacific Northwest segment, continued weakness in the Chinese export market has moderated near-term price expectations. New Zealand has also been impacted by weaker demand from China, but benefited from material improvement in shipping costs led by lower energy prices and relatively stable domestic demand.
Rayonier is the third-largest timber REIT with 2.7 million acres of high-quality timberland, and the company continues to profitably expand its timberland base through disciplined acquisition. In second-quarter 2015, the company acquired around 4,600 acres of timberland located in Florida and Georgia, through a series of small transactions with non-industrial private landowners.
In the first two quarters of 2015, Rayonier acquired 35,000 acres in the U.S. South and Pacific Northwest for a total of around $88 million. These high-quality assets located in strong timber markets reflect the company’s disciplined growth strategy which focuses on select acquisitions to upgrade land portfolio, grow sustainable harvest and generate cash available for distribution per share.
Moreover, with signs of improvement in the housing market, saw-timber prices are expected to move up. Backed by a strong balance sheet, we expect the company will enjoy continued access to capital on favorable terms, which, in turn, will help it fund future growth opportunities.
Earnings Whispers
Our proven model does not conclusively show that Rayonier will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at 2 cents, which translates into an Earnings ESP of 0.00%.
Zacks Rank: Rayonier’s Zacks Rank #2 (Buy), when combined with a 0.00% Earnings ESP, makes surprise prediction difficult.
Note that, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
You could consider other stocks in the finance sector that have the combination of a positive Earnings ESP and a favorable Zacks Rank, and are hence poised for an earnings beat this quarter:
Ashford Hospitality Trust, Inc. AHT sports a Zacks Rank #1 and has an Earnings ESP of +4.35%. It is scheduled to report on Aug 6.
CubeSmart CUBE has an Earnings ESP of +6.90% and a Zacks Rank #2. The company is slated to release results on Aug 6.
TCP Capital Corp. TCPC, with an Earnings ESP of +10.00% and a Zacks Rank #3, will report results on Aug 6.
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